Construction Spending Manages Slight Rise

Construction spending managed only a 0.1 percent rise in August to make Econoday's consensus range though just barely. Yet for residential investment, up 0.9 percent in the month, the results do point to a positive contribution to third-quarter GDP that would end a long string of declines.

Nonresidential spending is the weakness in August's report, down 0.4 percent in the month that reflects a decline in health care building as well as yet another decline for commercial building which has been especially weak this year. Power as well as sewage were also lower. Highways & streets, benefiting from heavy public spending, posted another solid increase.

But residential spending is the big plus in the report and is headlined by an outsized 1.4 percent rise for single-family homes which are central to the GDP calculation. Multi-family homes, which have lower per unit costs, fell 0.9 percent in the month. Home improvements are a plus in the report, up 0.9 percent in the month.

On the year, total construction spending was down 1.9 percent which is the best showing since April but extends the deepest negative run in eight years. And despite August's strengths, residential spending was down an annual 6.4 percent in August which compares with a year-on-year gain of 4.8 percent for non-residential spending.

Yet this report, especially what it indicates for housing, is a positive, suggesting that low mortgages together with strong employment are setting up housing for a late-year rally.